TopS&S Horizontal Logo

In This Issue:
  
Quick Links:  

 

SpotlightAttorney Spotlight
 

 

Janet Web Photo
Janet M. Dery, Esq.

 

Janet is a Partner in the firm whose areas of practice concentrate in SBA lending, and include banking, real estate, contracts, commercial and corporate law. She has a strong background in contract and corporate law which she regularly applies to her commercial lending practice.

Janet acts as a closing attorney for many commercial lenders located throughout the United States. As a closing attorney, Janet reviews SBA guaranteed and conventional loan files, confers with loan processors and in-house counsel, drafts, analyzes and negotiates loan documents, and advises on due diligence documentation.

In her corporate law practice, Ms. Dery advises on corporate governance and assists clients in all aspects of corporate transactional law, including the formation/incorporation of businesses and drafting, reviewing and negotiating various documents for business entities, which documents include interest-holder agreements, resolutions, corporate minutes, purchase agreements, and leases.

 

 

 

 

 

Facebook 

 

 

 

Starfield & Smith, P.C. is on Facebook!  

  

 

Find us on Facebook 

 

 
Become a fan of Starfield & Smith, P.C.  on facebook to receive updates, articles, and news pertaining to SBA and lending related topics. Just click on the badge above to get started!
  
Not on facebook? Sign up for free here.

 

Featured 

Best Practices: Disbursing Without a Borrowing Base Under the New Working Capital CAPline Program

 By:  Jessica Conn, Esq.

  

 

Jessica Conn
Jessica L. Conn, Esq.

The newest version of the SOP, which became effective October 1, 2011, included many changes to the CAPlines loan program. The CAPlines program is a specific facet of the 7(a) loan program that assists small businesses with their short-term working capital needs with credit lines. Certain CAPlines loans are designed for specific types of businesses. For example, there are CAPlines specifically for businesses with seasonal working capital needs or with working capital needs based on assignable contracts. There is also a CAPline developed for contractors in need of working capital for specific building projects. While all of these were impacted by the changes to the SOP, the most notable changes appeared in the development of the Working Capital CAPline.

 

           The CAPline program has always offered a standard asset-based line of credit, but lenders rarely utilized the program due to the rigorous underwriting and servicing requirements. The changes to the SOP were intended to make the Working Capital CAPline more user friendly, allowing lenders to advance working capital lines in a manner that is more consistent with their own bank policy. Under the new program, lenders now have the option of disbursing on a borrowing base certificate for asset-based lines, whereas before they were required to disburse on the basis of a borrowing base certificate.

 

           If the lender does not use a borrowing base certificate, it must follow the guidelines set forth by SBA in disbursing on the line. Lenders are expected to apply similar principals of credit underwriting to Working Capital CAPlines as they would on a similar-sized non-SBA line of credit. At a minimum, the lender must perform the following "(i) [a] cash flow analysis to determine the adequacy, duration and dependability of cash flow, (ii) [a] collateral analysis to establish an estimated value of collateral; and (iii) [an] owner/guarantor analysis" (SOP 50 10 5(D), pg. 240). On a CAPline that is $1,000,000 or less, the lender must obtain borrower prepared financial statements and tax returns. If the CAPline is over $1,000,000, the lender must obtain compiled, review or audited financial statements and tax returns, consistent with the lender's conventional policy with respect to similar loan products. Further, the lender should utilize financial covenants tested in a manner that is consistent with covenants that the lender would require conventionally on a similar loan product.

 

          The lender must secure a first lien position in the inventory financed by the line and corresponding accounts receivable ("Working/Trading Assets"). Additionally, the line must be secured with enough collateral to maintain a 1:1 collateral ratio, using the SBA's guidelines to calculate the ratio. If the Working/Trading Assets do not support the 1:1 collateral ratio, additional business assets must be pledged. If the business does not have sufficient business assets to meet the 1:1 collateral ratio, the lender must take and interest in personal assets of the principals to meet this requirement.

 

          Lenders should monitor the line in a manner that is consistent with their bank policies, but at a minimum, they must "conduct a credit review including cash flow analysis, collateral analysis to ensure there is a 1:1 collateral ratio, owner /guarantor credit review and site visit on an annual basis" (SOP 50 10 5(D), pg. 241). The line must be paid down with proceeds from cash sales and receivables as they are collected.

 

          For more information regarding the CAPlines loan program, contact Jessica at [email protected] or 267-470-1188.

   

 

SeminarSeminars and Events

 

               NAGGL's Closing and Funding the SBA Loan

 

Presented by:  NAGGL

Instructor:  Ethan Smith

Date:  December 5, 2011

Time:  8:30 AM - 4:30 PM

Location:  Chamber of Commerce Building

Address:   320 North Meridian Street

                      Suite 1011

                      Indianapolis, IN 46204

To register, click here 

 

 

                                                          Back to Top

 

DYKDid You Know... 

 Banner Stand 

 

Starfield & Smith, P.C. would like the thank everyone for a great NAGGL Annual Conference.

 

Thanks to all of you who stopped by our booth - it was nice to meet you. 

 

For those of you we did not have the opportunity to meet, we hope to do so in the future!

 

Please feel free to call us at (215) 542-7070 or send us an email, we'd love to hear from you!

 

  

 

twitter 

Starfield & Smith, P.C. is on twitter! Follow us for links to our most recent news and articles. Click here to follow us:   

 

Follow me on Twitter 


Back to Top

Rock Climber

 

ContactInfo Starfield & Smith, P.C.
Pennsylvania Office
1300 Virginia Drive | Suite 325
Ft. Washington, PA 19034
phone: (215) 542-7070 | fax: (215) 542-0723

 

* * * * *
   
Florida Office
1101  North Lake Destiny Road| Suite 105
Maitland, FL 32751
phone: (407) -667-8811|fax: (407)-667-0020

   

 
 Loan Documentation | Closing | SBA Guaranty Purchase
Franchise Consultation | Regulatory Compliance 
Business Consulting

 


This email is an advertisement from Starfield & Smith, P.C. and is subject to this disclaimer.
 � 2009-2011 Starfield & Smith, P.C. All Rights Reserved